California's Energy Crisis Sparks Budget Shortfall - 2002-05-15

Californians face cuts in public spending and higher taxes, to fill a budget shortfall sparked by the state's electricity crisis. The plan is likely to be challenged in the state legislature.

Governor Gray Davis is asking for a temporary increase in vehicle license fees and a hike in the cigarette tax, with deep reductions in health programs and aid to local governments. The spending cuts would total $7.6 billion.

The budget shortfall of more than $23 billion began with a debt incurred as the state intervened in a failing electricity market. Added security costs after the terrorist attacks of last September, coupled with a drop in tourist dollars, have deepened the state's fiscal problems.

This year's spending plan is a departure from the surpluses, tax cuts and generous spending that marked the first two years of the governor's term in office. Mr. Davis is a Democrat and in this election year, the budget plan is likely to be challenged by his Republican opponents.

The Republican candidate for governor, Bill Simon, has accused Mr. Davis of mishandling last year's energy crisis, while Mr. Davis says he did the best he could with a problem he inherited.

State lawmakers will review the governor's plan and send him a revised proposal, in theory, by mid-June. In practice, lawmakers often miss the deadline.

The governor's budget includes borrowing of more than $4 billion based on future revenues. Mr. Davis says the plan reflects his belief that the California economy, now emerging from a recession, will recover within the next year.